Chips are cooling down
Semiconductor market slowing, despite impressive first half of 2004
The worldwide semiconductor market is slowing down despite an outstanding first half of 2004, according to the latest figures from iSuppli.
The market watcher has trimmed its chip forecast for 2005. Global semiconductor sales grew by 31.4 per cent in the first half of 2004 compared with the first half of 2003, but second-half semiconductor sales will decelerate by 20 per cent compared with the same period in 2003.
Sales will flatten at the end of 2004, and iSuppli has predicted that semiconductor revenue in the first half of 2005 will grow by less that two per cent compared with the second half of 2004. However, the second half of 2005 will generate more growth, with chip sales rising by six per cent compared with the first half.
As a result, iSuppli has reduced its semiconductor revenue growth forecast for 2005 to 9.6 per cent, down from 11.8 per cent. A seasonal upswing in the second half of 2005 will not be enough to spur a real semiconductor recovery. ISuppli has predicted that 2006 will mark the bottom of the semiconductor downturn.
The decline in semiconductor growth is down to softening prices for chips and a general slowing in the electronic equipment markets, which drive chip sales.
"Two important products are the major culprits behind the equipment and chip slowdown: mobile phones and notebook PCs," said Gary Grandbois, principal analyst at iSuppli.
"Mobile-phone unit shipments, which have been soaring during the past two years with 30 and 18 per cent growth in 2003 and 2004 respectively, will slow to only five per cent growth in 2005. Meanwhile, notebook PC unit shipment growth will drop to 10 per cent in 2005, half the 20.1 per cent increase in 2004.
"However, the softening of these two product categories is only a symptom of the general deceleration of the electronics market, spurred by a tentative global outlook and the weakening of consumer upgrade purchases."
Although 2005 will see a dip, 2004 has been an outstanding year for chips.
Les Billing, managing director of Microtronica, agreed. "Growth this year, in unit terms, has been very strong across both AMD and Intel lines. Prices have come down, though, so revenues have not risen at the same pace. Things will be slower for the second half of this year - it can't carry on at that pace," he said.